When will I know how much money I’ll need for closing?

This is a common question from home buyers.  The Good Faith Estimate, when done properly is a good indicator of what money is due at closing, however it typically just includes the fees associated with the mortgage.   If there are other fees included with your transaction, such as an inspection or condo fees, they may not be reflected on the GFE.   The escrow company prepares an Estimated HUD-1 Settlement Statement that you review at closing.   

The HUD-1 Settlement Statement is essentially a balance sheet the Escrow Company prepares between both buyer and seller.  They gather all the fees and credits between all parties (buyers, sellers, agents, mortgage, etc.) and creates the amount due from the buyer and amount to be credited towards the seller.

The lender fees on the Good Faith Estimate should ideally correlate with the Estimated HUD-1.   For example, the fees shown on the GFE on line 801 (Origination) should be the same as line 801 on your Estimated HUD-1.   If there is a significant difference from your last GFE to the HUD-1, you should contact your Loan Originator to discuss it.

When does the buyer receive this document containing so much information?  Typically what happens is the escrow company waits until they receive the loan documents and escrow instructions from the mortgage company.   Escrow Officers often times won’t even make an appointment for signing until they have this information (loan docs) from the lender (they’ve been burned too many times setting up tentative appointments).   Sometimes, they will make exceptions if they know and trust the mortgage company.   So unfortunately, it’s usually close to signing when this document is prepared.   In most cases, someone from the escrow company will call you to schedule your appointment and will casually add, "you will need to bring a cashiers check in the amount of $$$". 

Did you know you can request a copy of the Estimated HUD-1 Settlement Statement prior to your signing appointment?   This is not standard practice, although it is totally acceptable.   Your lender needs to be on the ball enough to have provided escrow enough time to do this for you.  And you need to request it from the escrow company. 

I like to review the estimated HUD-1 before my clients ever see it (unless I’m unaware an appointment has been made…which can happen when it’s an escrow company we don’t normally work with).   Let’s face it, there can be errors made on the Estimated HUD-1 Settlement Statement…that’s why it’s called an estimate! 

After closing, you will receive a Final HUD-1 Settlement Statement which has, much as sounds, the final figures relating to your transaction prorated down to the day of closing.   You will want to hang on to this document for when you file your income taxes the following year.